What should a fiduciary do to avoid conflicts of interest?

A fiduciary has a critical responsibility to act in the best interest of the beneficiaries they serve. Disclosing all potential conflicts to the beneficiaries is essential to maintaining transparency and building trust. When a fiduciary openly communicates any relationships or situations that could influence their decision-making, it allows beneficiaries to be informed and to assess whether they believe the fiduciary can still act impartially.

This practice not only protects the fiduciary from allegations of impropriety but also aligns with the ethical obligation to act in good faith. If beneficiaries are aware of any potential conflicts, they can provide input or seek further clarification, which ultimately helps ensure that the fiduciary's actions align with the beneficiaries' best interests.

In contrast, choosing beneficiaries who are also friends can create a bias that could lead to favoritism. Ignoring personal relationships can lead to mismanagement or misunderstandings, as those relationships could influence decisions, either consciously or unconsciously. Prioritizing personal interests undermines the very essence of what it means to be a fiduciary, which is to prioritize the needs and interests of the beneficiaries above all else.